News

Construction Contracts in Maryland: Arbitration Provisions and Statute of Limitations

June 28, 2011

A recent Maryland case found that a contract containing an arbitration provision does not toll the statute of limitations on a claim for breach, nor does it affect the time at which the cause of action accrues. In other words, in some situations, even if your contract contains a mandatory arbitration provision, a contractor may still be required to bring a lawsuit in the applicable court or could lose its right to do so.

Many construction contracts in Maryland contain a dispute resolution clause, which outlines the method in which the parties should act in the event that a dispute arises. In some instances, the dispute resolution clause will require the parties to arbitrate any disputes before a private tribunal, in lieu of litigating the case with the applicable trial court. The arbitration provision will also outline whether the arbitration will be binding or non-binding. In a recent Maryland case, the Maryland Court of Special Appeals held that a party to a contract which contained a non-binding arbitration provision, did not bring its lawsuit in the lower trial court within the three-year statute of limitations, despite the fact that an arbitration proceeding had been held. Essentially, the Court determined that litigation in the appropriate trial court should have been filed and stayed, pending the arbitration between the parties, in order to ensure that the matter was filed within the requisite amount of time.

From a practical standpoint, if a construction contract contains an arbitration provision, it is important to make sure all avenues have been met to prevent waiving any of your rights. For additional information about construction contracts and provisions contained in construction contracts in Maryland, contact Michael W. Siri at siri@bowie-jensen.com.